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Industrial tomatoes in Panama : a comparative analysis of its competitive potential in the United States market for Panamanian producers

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  • A farm level comparative study was conducted to determine the extend to which the production component of the tomato industry of Panama is competitive with its American producer counterparts in California. In addition, processing costs, and marketing conditions/costs are factors that determine a competitive potential. The objective of this study was to examine the role and importance of the farm production cost component as an initial stage. A comparison of representative farm cost budgets was made between San Joaquin Valley, California, and Los Santos, a Panama province. Data for California production was obtained from publications of the University of California and the Cooperative Extension Service for Contra Costa, San Joaquin and Stanislaus Counties. Data for Los Santos was obtained from publications by the Agricultural Research Institute of Panama (IDIAP), a governmental Panamanian institution, and the agricultural technical service of Nestle. The data provided levels of input use and their cost for field operation practices commonly or typically found in each setting. Average total cost per ton was used as the standard for comparing competitiveness between United States and Panamanian producers. Initial examination showed Los Santos growers to have considerably lower production costs per acre but considerably lower yields per acre as well. Nevertheless some one-half of the Los Santos growers appear to be competitive. Recognition that 25-30% of all labor reported is unpaid operator and family made fully two-third of Los Santos growers competitive with their California counterparts. This left some one-third of Los Santos producers with low yields and resulting high unit costs/acre such as to be non-competitive. In comparing resource use influences, it was found that Los Santos growers use considerably higher levels of fertilizers, pesticides, and insecticides than growers in California, a probable consequence of Panamanian government subsidy of these materials. Some Panamanian reports suggest overuse of those materials. A marked contrast exists between the California and the Panama cases in relative resource mix. For Panama, labor was the dominant resource with a use level of 508 hours/acre at an average wage of 62.5 cents/hour. This contrasts with California where Capital intensive, labor saving machinery dominates resulting in only some 40 labor hours/acre at an average wage of $9.80/hour. Los Santos used 13 times more labor/acre in part because its wage structure is less than one-tenth as expensive as in California. The results suggest that, based upon the induced innovation hypothesis of Hayami/Ruttan, further agricultural research in Panama to improve agricultural productivity in processing tomatoes should continue to be labor using as the most abundant resource and land and capital saving which are relatively more scarce. This suggests biological research to improve yield and intensify land productivity while continuing with a labor, rather than machine, intensive mode. Finally, this study reviewed briefly the current two-price policy for domestic tomato production and for export. It found it to serve as a major inducement to increase domestic production while conversely serving as a major deterrent to produce for export. Major costs of this system are borne by the public sector for the producer subsidy and Panamanian consumers of processed tomato products who subsidize Nestle's loss of revenue in the export market through higher retail prices for processed tomatoes products.
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